2020 (3) TMI 1297 - AT - Income Tax

Maintainability of appeal on low tax effect - Revenue has pleaded that the assessment was reopened on the basis of the audit objection, and it has been provided in the circular that if the assessment has been reopened on the basis of audit objection, then that appeal against the order of the ld.CIT(A) would be decided on merit instead of dismissing it on tax effect - HELD THAT - We have confronted the Ld. DR with the CBDT Instruction bearing No.5/2017 dated 23/01/2017. These instructions provide that even if an assessment is being reopened on account of audit objection but the additions are deleted by the CIT(A) on merit, then for the purpose of challenging the order of CIT(A) in further appeal the case would be required to be examined on merit. Simply the appeal would not be filed because the case falls within the exceptional clause of the CBDT Instruction for not filing the appeal where the tax effect by virtue of relief granted by the CIT(A) is less than the monetary limit for filing such appeals. In other words, the Department has to assess the merits of the dispute involved and they will not file further appeal against the order of the CIT(A) or ITAT in a mechanical manner. See ASHOKKUMAR HARIKISHANBHAI BHAVSAR 2020 (1) TMI 1401 - ITAT AHMEDABAD Department has not brought any substantial material on the record pointing out that appeal was filed after evaluation of merit on the issues involved. It sought to recall the order of the Tribunal merely on the basis of audit objection, which is not sufficient for recalling the Tribunal order. Therefore, we do not find any error in the order of the Tribunal. Thus the miscellaneous application is rejected.

Summary

Issues:
Appeal based on tax effect below threshold - Circular No. 17 of 2019 - Exception for appeals based on audit objections - Evaluation of merit before filing appeal.

Analysis:
The judgment by the Appellate Tribunal ITAT Ahmedabad dealt with three Misc. Applications filed by the Revenue challenging the Tribunal's order based on apparent errors. The Tribunal had disposed of 628 appeals of the Revenue on the grounds that the tax effect involved was less than ?50 lakhs, following Circular No. 17 of 2019 issued by CBDT. The Revenue contended that if the assessment was reopened on the basis of an audit objection, the appeal should be decided on merit instead of dismissing it based on tax effect. The Tribunal referred to a previous case, ITO Vs. Ashokumar Harikishanbahi Bhavsar, where it was discussed that appeals should be contested on merit if an audit objection has been accepted by the Department. The Tribunal emphasized the need for evaluating the merits of the dispute involved before filing further appeals, as outlined in Circular No. 17 and Circular No. 5 of 2017. The judgment also cited the Hon'ble Bombay High Court's decision in Pr.CIT vs. Nawany Construction Co. (P.) Ltd., emphasizing the importance of proving that audit objections have been accepted by the Department before recalling orders. The Tribunal concluded that the Revenue failed to provide substantial material demonstrating the evaluation of merit before challenging the CIT(A)'s order, and thus rejected the miscellaneous applications.

The Tribunal highlighted that the Revenue did not show that materials were evaluated before appealing the CIT(A)'s order in the present cases. The judgment emphasized the consistency in approach between the case of Shri Ashokkumar Harikishanbahi Bhavsar and the present applications, indicating that the Revenue did not meet the requirement of evaluating merit before filing appeals. Consequently, the Tribunal found no merit in the miscellaneous applications and dismissed all three. The judgment reiterated the importance of following Circulars and evaluating the merits of appeals before challenging orders based on audit objections. The decision was pronounced on 11th March 2020 in Ahmedabad.